Mountain Province Borrows $33M After Mine Shuts

RAPAPORT… Mountain Province has taken out an additional $33 million loan from its largest investor to cover the loss of income caused by the cancellation of its May diamond tender.

The miner will receive the short-term loan on top of its existing $25 million revolving-credit facility from Dunebridge Worldwide, whose owner is a 32% shareholder in the company, Mountain Province said Wednesday.

Mountain Province plans to use the money to run the Gahcho Kué mine in Canada, as it is currently facing liquidity challenges after canceling its May rough sale due to a Covid-19 outbreak that shut the deposit for three weeks. At the same time, the company also had large expenses related to the ice road it uses to transport supplies to the site during the winter months. It expects to repay the loan by the end of the year, it noted.

“[The loan] allows us the time to execute on this year’s revised mine plan,” said Mountain Province CEO Stuart Brown. “This plan shows us largely making up the lost production, revenue and cash generation during 2021.”

The miner reported a profit of CAD 7.3 million ($6 million) in the first quarter, compared to a loss of CAD 40.1 million ($33.7 million) a year earlier. The company benefited from a favorable comparison with the same period in 2020, when operations were closed due to the coronavirus pandemic.

The appreciation of the Canadian dollar against its US counterpart also helped the company, providing $5 million in foreign-exchange gains on payment of its outstanding debt. Mountain Province repays debts in US dollars, but earns money in Canadian currency.

Rough-diamond sales fell 13% to $42.7 million for the quarter, with sales volume down 8% to 603,000 carats. The average price dropped 5% to $71 per carat. Although the average price decreased year on year, it was up 6% versus the fourth quarter of 2020, nearly returning to the pre-pandemic levels of $75 per carat seen in the first quarter of 2020, the miner explained.

In total, the mine produced 1.4 million carats, down 16% year on year, with the company’s 49% portion of production standing at 682,143 carats. De Beers owns the remaining 51% stake in the mine.

“With a tough quarter behind us, our focus now shifts to making up the carat shortfall and [the] revenue over the remainder of 2021,” Brown noted. “The diamond industry is bearing up well through the ongoing challenges of Covid-19, [while] globally retailers continue to report increasing revenue as economic activity increases. In turn, this is having a positive impact on polished- and rough-diamond prices.”

Mountain Province has forecast output of between 6.3 million and 6.5 million carats for the full year. The company produced 6.5 million carats in 2020. Despite the ongoing coronavirus impact in certain parts of the trade, the miner believes the industry will continue to bounce back.

“There will, no doubt, still be issues to deal with in the coming months, such as the intense second wave in India,” Brown added. “Hopefully, with all the work being done and [the] support, we will see a recovery in India and all participants in the industry will benefit from the continued desire for natural diamonds. We believe that the recovery across all sectors of the industry will continue for the remainder of 2021.”

Image: The Gahcho Kué mine. (Mountain Province)